2. Notice of public hearing to be held on July 16, 1997, was published in the Anchorage Daily News on June 12, 1997.

3. A hearing concerning the matter of the applicant’s request was convened in conformance with 20 AAC 25.540 at the Commission’s offices, 3001 Porcupine Drive, Anchorage, Alaska 99501 at 9:00 am on July 16, 1997.

4. BPX requested a portion of the testimony presented on July 16 be classified confidential and not included in the public hearing record. After evaluation of the subject materials, the Commission granted BPX’s request and sealed a portion of the hearing record dealing with the confidential information.

FINDINGS:

1. BPX is the operator of the Badami Oil Field; working interest owners are BPX and Petrofina Delaware, Incorporated.

2. The Badami Field, which was discovered in 1990, has been delineated to date on the basis of four exploratory wells and several seismic surveys.

3. Development drilling to the Badami Oil Pool is projected to begin in September 1997, and commercial production is expected to begin in October 1998. Initial production rate is anticipated to be about 35,000 bpd (annual average).

4. BPX proposes to establish a participating area for the Badami Unit and seek additional pool rules regarding drilling and completion practices, production practices, reservoir monitoring and other topics, as appropriate, following the completion of initial development wells and prior to commercial production.

5. The vertical limits of the Badami Oil Pool may be defined in the Badami No. 1 well, which appears to contain a typical and representative stratigraphic section of the reservoir.

7. The statewide spacing requirements of 20 AAC 25.055, which limits drilling one well per government quarter section, may not provide adequate flexibility in well locations to optimally exploit the pool.

8. Lithologic heterogeneity, faulting and sweep efficiency will determine the most efficient well spacing. BPX anticipates that localized conditions may require a well spacing density as small as 20 acres per well.

9. BPX’s plans for enhanced oil recovery operations include waterflood and miscible gas injection; the exact well locations are uncertain at this time.

CONCLUSIONS:

1. The Badami reservoir is incompletely delineated at this time.

2. Techniques to maximize ultimate recovery from the Badami reservoir are currently being evaluated.

3. Unless modified, statewide well spacing requirements may encumber complete delineation and development drilling of the Badami Oil Pool.

4. Defining the Badami Oil Pool and establishing well spacing for initial development is appropriate at this time.

NOW, THEREFORE, IT IS ORDERED THAT the rules hereinafter set forth, in addition to state-wide requirements under 20 AAC 25 apply to the following affected area referred to in this order.

Umiat Meridian

T9N

R19E

Section 1

T9N

R20E

Sections 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 14, 15, 16, 17

T10N

R19E

Sections 24, 25, 36

T10N

R20E

Sections 19, 29, 30, 31, 32, 33, 34, 35

Rule 1 Field and Pool Name

The field is the Badami Field. Hydrocarbons underlying the affected area and within the herein defined interval of the Canning Formation constitute a single oil and gas reservoir called the Badami Oil Pool.

Rule 2 Pool Definition

The Badami Oil Pool is defined as the accumulation of hydrocarbons common to and correlating with the interval between the measured depths of 9,500 feet and 11,500 feet in the Badami No. 1 well.

Rule 3 Well Spacing

Nominal 20-acre well spacing is established for the pool within the affected area. No well bore may be open to the pool within 500 feet of the external boundary of the affected area, or within 700 feet of another well capable of producing from the same pool.

Rule 4 Administrative Action

Upon proper application or its own motion, the Commission may administratively waive the requirements of any rule stated above or administratively amend this order as long as the change does not promote waste, jeopardize correlative rights, or compromise ultimate recovery and is based on sound engineering principles.